![Page 1: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/1.jpg)
Payments 101
Billie HigginsKay Limbaugh
![Page 2: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/2.jpg)
• Central Banking system• Created in 1913• Private banking system composed of
Board of Governors appointed by the PresidentFederal Open Market Committee12 regional BanksMember banksAdvisory councils
Federal Reserve
![Page 3: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/3.jpg)
Federal Reserve
Electronic Funds Transfer Act (aka Reg E)
• Issued by the Board of Governors of the Federal Reserve System• Implemented in 1978• Governs electronic fund transfers from a consumer’s account• Protects consumers’ rights and sets limits on consumer liability for unauthorized payments• Imposes specific obligations to billers for recurring payments
![Page 4: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/4.jpg)
Federal Reserve
Check 21
• Passed in Oct 2004 • Produces a digital image by scanning both sides of a paper check • If a paper document is needed, a photo-reduced copy of the original checks is created (“substitute check” or IRD (Image Replacement Document)
![Page 5: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/5.jpg)
IRD – Image Replacement Document
![Page 6: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/6.jpg)
Network = Automated Clearing House(ACH)
![Page 7: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/7.jpg)
ACH
ACH - Automated Clearing House
• The ACH network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system
• Governed by the NACHA operating rules • Provides for the interbank clearing of electronic payments
for participating depository financial institutions • The ACH network can be used to send either debits
(payments) or credits (refunds) A credit sends funds to a Receiver’s accountA debit takes funds from a Receiver’s account
![Page 8: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/8.jpg)
![Page 9: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/9.jpg)
ACH Participants & Definitions
• Originator: The company or individual that initiates an ACH transaction according to an agreement with a Receiver.
• Originating Depository Financial Institution (ODFI): The financial institution that transmits ACH files on behalf of the Originator into the ACH Network.
• ACH Operator: The central clearing facility operated by a private organization or Federal Reserve Bank, on behalf of participating financial institutions, to or from which financial institutions transmit or receive ACH entries.
• Receiver: A natural person (or organization) that has authorized the Originator to initiate an ACH entry (debit or credit) to the Receiver's account with the RDFI.
• Receiving Depository Financial Institution (RDFI): The financial institution that receives ACH entries from the ACH Operator and posts the entries to the accounts of the depositors (Receivers).
• Third-Party Processors: Processors that participate between any relationship within the ACH processing flow (i.e., correspondents, sending-point processors or payroll processors).
![Page 10: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/10.jpg)
Network = Automated Clearing House
(ACH)
NACHA
![Page 11: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/11.jpg)
NACHA – The ElectronicPayments Association
• Not-for-profit association • Represents more than 11,000 financial institutions through direct
memberships • Develops operating rules and business practices for:
– Automated Clearing House (ACH) Network (not Check 21)– Electronic payments in the areas of Internet commerce, e-bill and
invoice presentment, e-checks, EDI an electronic benefits services (EBS)
• NACHA estimates that more than 8.5 billion consumer bills were paid via the ACH Network in 2007, including pre-authorized debits, Internet and telephone-initiated payments, and checks converted into ACH payments.
(formerly known as the National Automated Clearing House Association)
![Page 12: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/12.jpg)
Network = Automated Clearing House
(ACH)
NACHA
ACH Rules
![Page 13: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/13.jpg)
![Page 14: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/14.jpg)
Each type/method of payment in the ACH “world” has its own rules and guidelines. These are determined by the Standard Entry Code (SEC) used in the payment file.
![Page 15: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/15.jpg)
POS
SHR
CIE
CTX TRC
TRX
ENR
CBR
PBRDNE MTE
MTE
DNE
XCK
COR
ATX
ACKPOS TEL
WEBRCK
BOC
AAAAAHHHHHHH ! ! ! !
ARC
PPD
CCD
![Page 16: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/16.jpg)
Commonly used SEC codes for the Utility Industry
(High level definitions!)
![Page 17: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/17.jpg)
• ARC – Accounts Receivable Conversion
– Mailed in payments to a biller’s lockbox– Dollar limit $25,000– Must be a consumer check– Check is scanned, destroyed – Must have notification on bill statement each month (see
ACH rules for requirements)– Must give customer option to Opt-out– Must retain legible copy of front for 2 years– Original document must be stored securely and/or
destroyed– Volume in 2007 for ARC grew by more than 600 million
payments to 3.5 billion, an increase of 23 percent.
![Page 18: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/18.jpg)
• POP – Point of Purchase
– Customer writes check and it’s converted at time of purchase
– Check is returned to the customer
– Authorization = supplied by merchant and signed by customer at time of payment
– $25,000 limit
– No AUX On-Us on MICR line
![Page 19: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/19.jpg)
![Page 20: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/20.jpg)
• WEB - Internet Initiated Payments
– Authorization received via the internet– Authorization must be in writing or similarly authenticated. – Consumer transactions only– Customer must be “reasonably” authenticated – Applies to both one-time or recurring payments; but rules
are different for each (stop payment, revocation of authorization, etc.)
– NACHA reports WEB payments grew by an estimated 26 percent to 2.3 billion in 2007
![Page 21: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/21.jpg)
• TEL – Telephone Initiated Entries
– Single entry payments
– Consumer accounts
– Must use commercially reasonable procedures to verify consumer’s identity
– Authorization must be oral and recorded (cannot use key entry for authorization)
– Must provide in authorization:• Date
• Amount
• Name
• Telephone number to be reached during business hours
– Cannot exceed 2.5% “unauthorized payments”
![Page 22: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/22.jpg)
• RCK – Re-Presented Check Entries
– Returned paper checks can be converted by your financial institution to an ACH item
– This allows 2 re-presentments instead of 1 with paper check
– PGE (before ARC) enjoyed a 25+% success rate on the 2nd re-presentment
– Notification must be clear and conspicuous on your billing statement
– Must retain copy of the front and back of the check for 7 years
![Page 23: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/23.jpg)
• PPD or CCD
– Used for Automatic Debit Programs (Direct Payment) – Recurring payments initiated by biller– Must have written authorization– Retention of authorization - kept for 2 years after customer
requests cancel– PPD used for “Consumer” bank accounts– CCD used for “Corporate” bank accounts (have an
auxiliary on-us in MICR line)– NACHA reports pre-authorized payments increased by 3.6
percent to 3.4 billion payments in 2007
![Page 24: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/24.jpg)
Resources
• Nacha.org• Ebilling.org
Your New Best Friend
![Page 25: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/25.jpg)
• PGE has converted all payment channels to ACH……
Mail-in payments – ARCCommunity Office – Remote Deposit (BOC)Walk-up Retail Locations – POPKiosk Payments - vendorIVR Payments –TELIVR Credit Card payments – vendorConsolidators Auto Pay – PPD and CCDWeb payments – WEBEDI 820’s - CTX
![Page 26: Payments 101 Billie Higgins Kay Limbaugh. Central Banking system Created in 1913 Private banking system composed of Board of Governors appointed by the](https://reader030.vdocuments.net/reader030/viewer/2022032607/56649eba5503460f94bc19ea/html5/thumbnails/26.jpg)
Other terms (Your homework!)
• Aux on us• EDI• MICR line• Non-contracted payments• NOC• EBPP• Lockbox• M-payments• B2B, B2C Questions?